Facebook fundraisers may be taxed. One do-gooder got a 'huge shock' after a $16,000 tax bill

Terry Collins, USA TODAY
·8 min read

So you want to hold a fundraiser on Facebook? Don't forget to read the fine print.

Louis Goffinet, a Connecticut middle school teacher who began a fundraiser on Facebook last year to help buy groceries for families in need as the COVID-19 pandemic started to spread, learned that the hard way.

What began by asking a few Facebook friends for $200 in donations quickly went viral. Goffinet eventually raised more than $41,000 to purchase and deliver groceries for more than 100 families in his hometown of Mansfield Center, Connecticut, as well as help pay rent and buy gas.

He was hailed as a hero for putting together not one, but two fundraisers where he spent days, nights and weekends helping others. Then, Goffinet got a huge surprise in January: The Internal Revenue Service sent him a letter with a 1099-K form saying what he'd raised is taxable as income.

An early estimate indicates he could owe more than $16,000 in taxes.

"It was a huge shock," the 27-year-old Goffinet told USA TODAY on Monday. “It’s a big amount, especially in the context with me being a teacher who does not have $16,000 idly waiting to pay taxes.”

It started when Goffinet went shopping for an older neighbor who was worried about going grocery shopping during the pandemic.

Goffinet realized others may also need help, and he put out a call on his hometown's Facebook page to raise funds, his CPA, Dawn Brolin, told USA TODAY.

In addition to teaching classes online due to the pandemic, Goffinet said he made about 140 grocery trips that provided dinners for 125 families, along with 31 Thanksgiving dinners, holiday gift cards for 20 families and rent assistance for five families. Some businesses, including Domino's Pizza, helped out, as well.

"It got to the point where it really felt like another job as it became a part of my weekly schedule," Goffinet said. "After I was done teaching, I'd see what donations came, and I'd go grocery shopping in the evenings or during the weekend. It became wash, rinse and repeat."

Goffinet, who put the funds in his bank account and kept track of spending, "wasn't even considering that there would be repercussions for not setting up an LLC or a 501(c)(3)."

Has Netflix reached its peak? Netflix subscriber growth slows, stock drops 10%. Streaming service expects 1 million new additions this quarter

A new world at work: How tech will help many of us readjusting back to the office post-COVID

Facebook fundraisers can be taxed

What happened is simply Goffinet's good deed coming at an impossible cost, Rick Cohen, chief operating officer and spokesman for the National Council of Nonprofits, said Monday. Using a third-party platform like Facebook to get funds meant Goffinet actually received personal income since he doesn't have an accredited nonprofit, and the donations were not considered tax-deductible.

"The money is going to an individual and not a tax-exempt entity," Cohen said. "It's seen as income, even if he had a charitable aim in mind."

And Goffinet's good deed is what Brolin said she plans to show the government. The principal at the middle school where Goffinet teaches introduced him to Brolin.

"I’m definitely willing to support him, and if the IRS disagrees, then we are going to fight it," Brolin said. "We believe there are no taxable transactions here, and we are going to stand on it."

Brolin said there are several angles she intends to make clear with the IRS, including Goffinet's intent, his burden of proof that he was helping others in need and that those who donated did not expect to receive a gift in return.

"Every penny will be accounted for if I can help it," she said.

Facebook’s policy states that any funds received through a personal fundraiser on the social media platform may be taxable and that if more than $20,000 is raised, a 1099 form will be issued by Stripe, a company that processes payments for personal fundraisers on Facebook.

"Funds that you receive through a personal fundraiser on Facebook may be taxable. Factors that determine if the funds are taxable include the amount received, the intended use of the funds and the location where you reside. Please consult a tax professional for questions," Facebook's policy says.

Although Facebook didn't directly address Goffinet's situation, a company spokesperson said, "While taxable income decisions are made by the IRS and are outside of Facebook’s control, we understand the impact that this can have on people. That's why when someone starts a personal fundraiser, we let them know in the first step of the process that they may be responsible for taxes, and we include additional information in our Help Center."

People have raised more than $5 billion combined for personal causes and nonprofits on Facebook and Instagram since 2015 – $2 billion just within the last year, according to Facebook. In 2020, the company said people raised more than $175 million for coronavirus-related causes globally on Facebook and Instagram.

Many use Facebook's fundraising tool for their birthdays, often after receiving prompts in their news feed encouraging them to consider donating to a charity. Brolin said each year she asks her Facebook friends to donate to a foundation at Eastern Connecticut State University, where she's an assistant softball coach and teaches accounting classes. Instead of Brolin receiving the funds, they go directly to the school's nonprofit foundation and are used to buy athletic equipment for the small, NCAA Division III school, Brolin said.

What about GoFundMe?

Facebook isn't the only company with certain disclaimers for online fundraising. While the popular GoFundMe states its fundraisers are "usually considered to be personal gifts which, for the most part, aren’t taxed as income," there are some exceptions.

GoFundMe said there may be "particular case-specific instances where the income is, in fact, taxable for organizers" that depend on the amounts received and how the funds are used. The company recommends talking to a tax professional just to be sure.

Cohen offers a similar suggestion and said the best course of action is to work with a reputable nonprofit that has the infrastructure already in place and tax-exempt status.

What you need to know: Before you start that fundraiser, consider this.

Yet, another tax expert said it is OK to use online apps like Facebook, GoFundMe, PayPal and Venmo for personal fundraising, provided they can meet two goals.

"It comes down to two things," said Dan Geltrude, a CPA and founder of accounting firm Geltrude & Company LLC in Nutley, New Jersey. "One, what was the campaign organizer’s intention, the reason for the fundraising, and two, was there any exchange of goods or services related to the campaign.

If you give $10 and get a pair of sunglasses, for example, the money is taxable, he continued. "If not, then the IRS considers that a gift and it would not be considered taxable."

Toby Mathis, a partner and attorney at Anderson Law Group in Las Vegas agrees. Goffinet is "going to be fine if he can show that he was raising money for others," said Mathis, who thinks online apps are safe to use for fundraising.

PayPal did not reply to multiple requests for comment and Zelle did not immediately return a request for comment about their fundraising policies.

'I'm optimistic': How will Goffinet resolve his tax bill?

Goffinet surveyed the families in need, asking them what their kids' favorite cereals and snacks were and what foods they didn't eat for allergy, dietary or religious reasons. He would shop with a printout of each family's survey.

"I felt like I was being entrusted with other people’s money and to make sure it’s food that would go to good use and wouldn’t be thrown out," said Goffinet, recalling the time when he saw a child crying in a driveway after getting a box of Cheez-It crackers he requested. "That was a good feeling."

Goffinet hopes Brolin and her accounting team can help him point out how the money was used to benefit his community. He said it's been uncomfortable asking his Facebook friends again for money – this time to help pay his tax bill during a pandemic. He's so far received $3,800 in checks by mail.

"I’m optimistic that the gifts keep coming in, and anything I raise in excess of my tax bill will be used for something good," Goffinet said. "The need still exists in my community. I promise it will be put to good use."

Before you start a fundraiser

Cohen, the national nonprofit executive, said those who want to start a fundraiser should check to see if local nonprofits are doing anything similar or talk to a tax expert.

And with respect to people like Goffinet and others who have jumped in to help those in need in their communities and elsewhere, Cohen said they should be aware of possible tax implications.

"I’m sure everyone who benefited is grateful for what (Goffinet) did, and it doesn’t matter to them if it’s from a nonprofit or an individual, all that matters to them is that they got the assistance they needed," Cohen said. "Before you jump in, be sure you know what the rules are and find the best avenue for making that difference."

Brolin agrees and added that she wants to see Goffinet "made whole" for his benevolence.

"I’m going to do everything I can to put him in the right position," said Brolin, noting the tax bill is due May 17. "At the end of the day, you can’t knock a guy for truly trying to help people."

This article originally appeared on USA TODAY: Facebook fundraiser: Teacher finds out he may have to pay taxes